Being unemployed can be an ordeal. It can be even more challenging if you’re looking to buy a home or refinance your home loan, as your employment status affects your home loan application.
As income is one of the essential factors when seeking approval for a home loan, lenders might view you as a risk if you’re unemployed.
So, how do I get a home loan if I’m out of a job?
Select lenders may ask you for proof of some form of income to check that you can repay the loan.
Other than that, there are a few ways you might be able to secure a loan while being unemployed:
Using a co-signer
A co-signer is someone who contractually agrees to pay the debt if the applicant doesn’t make payment. It could be one of your parents or your spouse. They’ll need to be employed or have a massive net worth.
Using investment income
If you own stocks or have made investments, you could use the income you receive from those streams. However, loans approved by using investment incomes could have higher interest rates.
Using other sources of passive income
Generally, passive income can come from rental property or a business where you are not actively involved. Examples of passive income include dividends, rental income, book royalties, alimony and more.
Few lenders might consider these income sources when judging your loan application.
Using your net worth
If you have a considerable net worth, you can show this to lenders as proof that you can make the repayments on time.
Note: Even if you can use the ways mentioned above, it might still be challenging to qualify for the loan.
What if I just lost my job?
If you’ve just lost your job, you could try providing the lender with your employment history and let them know that you are actively pursuing a job. You’d also need to show alternative sources of income or a saved deposit as proof that you can make the repayments.
Even then, the chances of getting approval can be very low.
What if I just started a new job?
If you’ve just started a new job or if you’re on probation, we have good news for you. At Home Loan Experts, we know lenders on our panel who might be able to help you.
Can I get a home loan while on probation at work?
You can get a home loan while on probation at work to ensure that your job is secure while applying for a home loan. We know a few lenders who might get your application approved.
Most lenders might approve your loan if:
- Your minimum probationary period is between 3 months and 6 months.
- You’ve been working in the same industry or the same role for at least two years.
- Most lenders require a 12-month employment history (we do know a lender who will accept a 3-month employment history).
- You must be in a solid financial position and have a long work history as well.
- Firstly, we recommend finding work in the same industry, or if you’re in a new industry using the same skills in your new job.
- You must have documents proving your current employment status, such as your employment contract or payslips.
- You must save a large deposit of at least 20% of the property value to avoid paying Lenders Mortgage Insurance.
- You must provide adequate reasons for the change in the job. Most lenders won’t approve your application if you’ve been terminated from the previous job without acceptable reasons.
- You must save enough money to cover repayments for at least 3 to 6 months.
- You must keep your credit file clear of records such as late payments, missed payments, etc., to demonstrate that you’re a responsible borrower.
- As long as your income can be proven, we know lenders who can assist you.
Read more on how to apply for a home loan during your probationary period here.
A handful of lenders will most likely consider approving your loan if you’re starting your new job in a similar industry. You will need to provide proof that you’ve started a new job, such as your employment contract or payslip.
You can contact us on 1300 889 743 or fill in our free assessment form to find out if you qualify. Also, we highly recommend that you use our job loan calculator to find out your chances of getting approved.
What if I’m working only temporarily?
Approving home loans for short-term employment can be tricky for most lenders. However, if you have a strong work history, we know lenders who will accept your home loan application.
Some of the requirements that the lenders might want:
Read more on how to get approved when you’re working on a temporary basis.
What if I’m a casual employee?
Casual employees work irregularly or on a call-in basis. They often don’t have specified days and time as permanent employees.
If you’re a casual employee, most lenders require you to be in your jobs for at least 12 months. However, the lenders we know might accept between 3 and 6 months in a job, especially if you’re working in a high-demand industry such as health, IT or education.
Read more about how you can get approved for a home loan as a casual employee here.
Can I get a home equity loan without a job?
Without a job, it might be challenging to secure a home equity loan. But some lenders might consider your application if you have alternative sources of income, such as social security, rental payments, a trust fund, child support or alimony.
You could also use a co-signer’s income to help you meet the debt-to-income ratio requirements of the lender.
A Case Study
Joan is unemployed; her husband is not
Joan is currently unemployed; she quit her job to move back to her home state, and start working there.
Her husband earns about $120,000 a year.
They’re planning to move back to their home state and are browsing for property there whilst selling their current home.
Once Joan finds a job, she’d easily make about $45,000-$55,000 yearly. The couple has set aside about $40,000 as a deposit for the new house and is looking to spend below $300,000 on a home.
Can she secure a home loan?
Joan could secure the loan based on her husband’s income. Their loan application would be based on her husband’s income as well as their household debt to income levels.
How to get approved after unemployment
For a higher chance of getting approved for a home loan once you start a new job, here are some things you need to bear in mind:
On top of that, our expert mortgage brokers will help you apply with the right lenders, who will accept your unique employment status.
You can contact us on 1300 889 743 or fill in our free assessment form.